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The Employee Ownership Update

Loren Rodgers

December 17, 2012

(Loren Rodgers)

European Union to Create European Centers for Employee Ownership

The European Federation of Employee Share Ownership announced that the European Parliament had approved a pilot project to create a center for employee ownership in each EU member state. The NCEO wrote a formal letter in support of the effort, and we will provide more information as it becomes available.

Apply for the Working Better Award by February 28

The Working Better Award recognizes companies that develop high-engagement employee-owned workplaces. Applicant companies complete a brief application and work with the NCEO to administer a free 25-item employee survey that measures qualities vital to developing a successful, engaged workplace. An award committee will determine the winners using the survey results, as well as the company's application responses. Winners will be announced at the 2013 Employee Ownership Conference in Seattle, WA.

We will soon send NCEO members an email including links to the application as well as more information about the process. For more information now, visit the Web page for the Excellence in Ownership Awards, which include the Working Better Award and the Innovations Award.

Cuba Launches Pilot Project for Worker Cooperatives

On December 11, the Cuban government announced new rules for cooperatives designed to increase the number of worker-owned businesses in a move expected to be part of a shift toward free markets. The state-owned newspaper Granma noted that under the initiative, cooperatives "will not be administratively subordinated to any state entity." The pilot program is intended to create 200 new cooperatives and makes cooperatives more attractive in a variety of ways: cooperatives will pay lower taxes than the self-employed, they will be able to bid for idle government property, and the minimum number of members was lowered to three. The cooperatives will not be free from government control: applications to form a cooperative will have to be approved by local governments and the Council of Ministers.

Employee Ownership by Pilots at American Airlines

The Allied Pilots Association (APA) at American Airlines announced on December 7 that its members had approved a new six-year contract. Union members will own 13.5% of the stock in the new AMR, the parent company of American Airlines, when it emerges from bankruptcy, which analysts estimate would amount to at least $100,000 per pilot. The contract, approved by a a vote of 5,490 to 1,951, will also raise pilots' pay by 4% on signing and 2% per year after that, with an adjustment in the third year to bring pay in line with that of other big airlines.

Last week, AMR creditors invited the pilots union to join talks between AMR and US Airways on a possible merger, which the union has already endorsed. The president of the APA, Keith Wilson, said, "As the new owners of a significant percentage of the restructured airline, it's APA's responsibility to maximize the value of our investment by conducting thorough due diligence."

UPenn Program for ESOP Company Executives

The Center for Organizational Dynamics at the University of Pennsylvania will again host "the first and only program anywhere formally addressing the relationship between the distinctive nature of ESOP companies and the effectiveness of leaders." The program consists of two week-long sessions, one in June and one in November. Topics include the challenges and opportunities unique to leading an ESOP company, practical ideas to promote employee engagement, implications of recent research, and strategies for building a high-performance ownership culture. Attendees will also leave the program with a network of peers at other ESOP companies. More about the program is available online or by contacting the program's academic director Ginny Vanderslice (215-292-4865, virginiv@sas.upenn.edu).

New Academic Award: Emerging Scholar Awards in Employee Participation and Ownership

The Foundation for Enterprise Development, the Employee Ownership Foundation, and Equity Administration, Inc., announced a new award program for promising research by an emerging scholar that would "identify innovative research in management or management-related disciplines that considers high-impact ideas in the context of business and society's needs for employee empowerment, participative workforces, and wealth creation through broad-based equity and profit-sharing mechanisms, work practices, organizational structures, and innovation and entrepreneurial models." Applications are due February 1, 2013, and more information on the awards, including application instructions, are available online.

Only 40% of Private Sector Workers Are in Retirement Plans

Data from the authoritative Employee Benefit Research indicates that only 48.8% of all private sector workers aged 21-64 worked for a company that sponsored a retirement plan, and just 39.6% participated in the plan. The rates vary considerably by age, income, and the size of the employer. For instance, the sponsorship rate for full-time, full-year employees in the private sector in this age group is 55.7%, and the participation rate 47.9%. The numbers for workers making $75,000 a year or more are 69.3% and 65.8%, falling to 14.6% for workers in the $10,000 to $20,000 per year group. In the size group of typical ESOP companies, 10-500 employees, 48.5% worked for a company with a plan and 38.7% participated in the plan.

The data again underline a key flaw in concerns about ESOPs as retirement plans, namely that they are insufficiently diversified compared to other plans. But ESOP companies usually have other retirement plans as well; cover all the eligible employees, not just those choosing to participate; and are much less skewed in the distribution of company contributions. Most employees in the private sector, it turns out, are also not diversified: they are entirely invested in nothing.

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